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As an investor its worth striving to ensure your overall portfolio beats the market average. But if you try your hand at stock picking, you risk returning less than the market. We regret to report that long term Finward Bancorp (NASDAQ:FNWD) shareholders have had that experience, with the share price dropping 36% in three years, versus a market return of about 28%.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
View our latest analysis for Finward Bancorp
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the three years that the share price fell, Finward Bancorp's earnings per share (EPS) dropped by 15% each year. This change in EPS is reasonably close to the 14% average annual decrease in the share price. So it seems that investor expectations of the company are staying pretty steady, despite the disappointment. In this case, it seems that the EPS is guiding the share price.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Finward Bancorp the TSR over the last 3 years was -29%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Finward Bancorp provided a TSR of 26% over the year (including dividends). That's fairly close to the broader market return. To take a positive view, the gain is pleasing, and it sure beats annualized TSR loss of 4%, which was endured over half a decade. We're pretty skeptical of turnaround stories, but it's good to see the recent share price recovery. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Finward Bancorp (of which 1 makes us a bit uncomfortable!) you should know about.